Tags: Japan | Machinery | Orders | Gradual | Recovery Still | Seen

Gradual Japanese Recovery Still Seen Despite Weak Economic Data

Monday, 13 Jun 2011 11:52 AM

Japan's core machinery orders unexpectedly fell in April, suggesting a bumpy recovery from a devastating earthquake and tsunami as some companies delay capital spending until reconstruction-driven demand materializes.

The economy is still expected to pick up steam in the second half of the year, allowing the Bank of Japan to refrain from further policy easing when it meets this week. However, a government official told reporters a double digit rise in orders firms had forecast for this quarter back in March, looked hard to achieve after Monday's data.

"A loss of business confidence outweighed expectations for reconstruction demand. April was still too early," said Takuji Okubo, chief economist at Societe Generale Securities.

"But we can be still positive about the capital expenditure outlook. We expect machinery orders to grow from May to June as demand eventually will come. The figures were disappointing but not alarming, so the BOJ can afford to be on hold."

Machinery orders data, albeit volatile, are seen as a key measure of corporate activity that can translate into jobs and private consumption.

Core machinery orders fell 3.3 percent in April from the previous month, Cabinet Office data showed on Monday, weighed by orders from machine manufacturers and transportation service firms. The Cabinet Office decided to exclude orders for mobile phones from April data, saying they no longer reflected capital expenditure trends.

The fall in core orders, compared with the median market forecast for a 2.2 percent increase and follows a 1.0 percent rise in March.

The surprise fall contributed to a drop in the Nikkei benchmark stock index, dragged down by further signs of a global economic slowdown and losses for Toyota Motor after a weaker-than-expected earnings forecast.

The government adjusted the orders forecast for the current quarter to account for the exclusion of cellular phones to a 10.4 percent rise from 10.0 percent, but a Cabinet Office official said the forecast made in March looked problematic after a drop in April.

At the end of each quarter the government asks companies to forecast orders trend for the next quarter, so the next set of forecasts will be published with June data.

Economists expect the economy to shrink for a third straight quarter in April-June after a March 11 earthquake and tsunami wiped out whole coastal communities, leaving about 23,000 dead or presumed dead, triggered meltdowns at a nuclear plant and drove Japan into its second recession in three years.

The world's third-largest economy is seen resuming growth in the second half of the year as exports and production recover and the authorities are expected to release a second batch of disaster relief and reconstruction spending after 4 trillion yen ($50 billion) approved last month.

Shortages of electricity could disrupt some manufacturing activity in the summer, but companies have been making progress in restoring lost production and mending supply chains.

The Bank of Japan will consider expanding a loan scheme that targets growth industries by up to 1 trillion yen ($12 billion) at a rate review ending Tuesday, sources familiar with the central bank's thinking have told Reuters, keeping up its efforts to battle chronic ills that are plaguing the economy.

But given growing signs that the economy is recovering from the immediate shock of the disaster, the central bank is set to hold off on easing monetary policy further unless a sharp spike the yen threatens to dampen business sentiment.

© 2017 Thomson/Reuters. All rights reserved.

1Like our page
2Share
Economy
Japan's core machinery orders unexpectedly fell in April, suggesting a bumpy recovery from a devastating earthquake and tsunami as some companies delay capital spending until reconstruction-driven demand materializes. The economy is still expected to pick up steam in the...
Japan,Machinery,Orders,Gradual,Recovery Still,Seen
565
2011-52-13
 

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved